United Community Banks, Inc. Reports Earnings of $15.9 Million for Fourth Quarter 2013

BLAIRSVILLE, GA--(Marketwired - Jan 23, 2014) - United Community Banks, Inc. ( NASDAQ : UCBI )

  • Net income of $15.9 million, or 22 cents per share 
  • Loans up $62 million, or 6 percent annualized 
  • Redeemed $180 million of TARP preferred stock 
  • All capital ratios remain strong

United Community Banks, Inc. ( NASDAQ : UCBI ) ("United") today reported substantial progress in growing the long-term value of its franchise. For the fourth quarter and year ended December 31, 2013, net income was $15.9 million, or 22 cents per share, and $273.1 million, or $4.44 per share, respectively. The year-to-date results include the impact of two significant events during the second quarter -- the reversal of the valuation allowance on United's net deferred tax asset and the higher provision for loan losses and foreclosed property costs from the accelerated sales of classified assets.

"I am very pleased with the important progress we made in the fourth quarter and continue to make as we enter 2014," said Jimmy Tallent, president and chief executive officer. "We achieved good loan and deposit growth, which allowed us to hold our net interest margin and grow net interest revenue. I'm especially pleased with the termination of the bank and holding company informal memorandums of understanding with the regulators and the redemption of all our outstanding preferred stock that was originally issued to the U.S. Treasury under the Troubled Asset Relief Program ("TARP") without issuing additional equity. We redeemed $75 million on December 27, 2013 and $105 million on January 10, 2014. These items will have a substantial impact on our future financial performance and our ability to execute our strategic plan."

The fourth quarter provision for credit losses was $3.0 million, the same as the third quarter provision but down substantially from the $14.0 million provision in the fourth quarter of 2012. For the year, our provision for credit losses was $65.5 million compared with $62.5 million in 2012. The 2013 provision was elevated by charge-offs associated with the accelerated classified loan sales in the second quarter. The resulting reduction in classified loans led to lower net charge-offs and lower provisions for the third and fourth quarters of 2013. Fourth quarter net charge-offs were $4.44 million compared with $4.47 million in the third quarter and $14.5 million a year ago. Nonperforming assets at year-end were $31.0 million, representing .42 percent of total assets, which is unchanged from third quarter and down from $128.2 million, or 1.88 percent of total assets, a year ago.

Fourth quarter taxable equivalent net interest revenue totaled $55.9 million, up $1.62 million from the third quarter and down $265,000 from the fourth quarter of 2012. The fourth quarter taxable equivalent net interest margin was 3.26 percent, equal to the third quarter and down 19 basis points from a year ago. "We were able to hold our margin at the third quarter level, which allowed our earning assets and deposit growth to increase net interest revenue," said Tallent. "Competitive loan pricing pressures continue, but we remain sharply focused on growing loans and deposits to offset the impact and grow net interest revenue. We also remain committed to prudent interest rate risk management. To that end, we have been purchasing floating-rate securities, which accounted for 42 percent of our total investment securities portfolio at year-end, up from 39 percent in the third quarter."

Fourth quarter fee revenue of $13.5 million was down $706,000 from third quarter and $1.13 million from a year ago primarily due to lower mortgage fees. Mortgage fees were down $841,000 from the third quarter and down $1.55 million from a year ago reflecting slower mortgage refinancing activity resulting from rising long-term interest rates. Closed mortgage loans totaled $55.5 million in the fourth quarter compared with $76.6 million in the third quarter and $100.5 million in the fourth quarter of 2012.

Operating expenses, excluding foreclosed property costs, were $41.4 million for the fourth quarter compared to $39.9 million in the third quarter of 2013 and $46.1 million a year ago. Fourth quarter 2012 operating expenses included a $4.0 million charge to establish a litigation reserve. The remainder of the decrease from a year ago reflects a lower FDIC deposit insurance assessment, lower professional fees and lower intangible amortization charges. The increase from third quarter was mostly in salaries and benefits expense, reflecting higher incentive compensation due to performance targets that were met.

Foreclosed property costs were $191,000 in the fourth quarter compared to $194,000 in the third quarter and $4.61 million a year ago. Foreclosed property costs remain low as the balance of foreclosed properties has stabilized following the accelerated sales of classified assets in the second quarter.

As of December 31, 2013, capital ratios were as follows: Tier 1 Risk-Based of 12.7 percent; Total Risk-Based of 14.0 percent; Tier 1 Common Risk-Based of 9.3 percent; and Tangible Equity-to-Assets of 11.6 percent. The Tier 1 Leverage ratio was 9.1 percent.

Tallent concluded, "The achievements of 2013 are the culmination of several years of hard work, diligence and dedication by our bankers. They have stood their ground during the most difficult economic environment any of us has ever faced, and played an integral role in our return to offense. The coming year will not be without challenges, but we look forward with confidence to the opportunities ahead."

Conference Call
United will hold a conference call today, Thursday, January 23, 2014, at 11 a.m. ET to discuss the contents of this news release and to share business highlights for the quarter. To access the call, dial (877) 380-5665 and use the conference number 29377597. The conference call also will be webcast and can be accessed by selecting 'Calendar of Events' within the Investor Relations section of United's website at www.ucbi.com.

About United Community Banks, Inc.
Headquartered in Blairsville, United Community Banks, Inc. is the third-largest bank holding company in Georgia. United has assets of $7.4 billion and operates 102 banking offices throughout north Georgia, the Atlanta region, coastal Georgia, western North Carolina, east Tennessee and western South Carolina. United specializes in providing personalized community banking services to individuals and small to mid-size businesses and also offers the convenience of 24-hour access through a network of ATMs, telephone and on-line banking. United's common stock is listed on the Nasdaq Global Select Market under the symbol UCBI. Additional information may be found at United's website at www.ucbi.com.

Safe Harbor
This news release contains forward-looking statements, as defined by federal securities laws, including statements about United's financial outlook and business environment. These statements are based on current expectations and are provided to assist in the understanding of future financial performance. Such performance involves risks and uncertainties that may cause actual results to differ materially from those expressed or implied in any such statements. For a discussion of some of the risks and other factors that may cause such forward-looking statements to differ materially from actual results, please refer to United's filings with the Securities and Exchange Commission including its 2012 Annual Report on Form 10-K and Quarterly Reports on Form 10-Q for the first, second and third quarters of 2013 under the sections entitled "Forward-Looking Statements" and "Risk Factors." Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements.

   
UNITED COMMUNITY BANKS, INC.  
Financial Highlights  
Selected Financial Information  
   
2013
   
2012
       
(in thousands, except per share data; taxable equivalent)   Fourth Quarter     Third Quarter     Second Quarter     First Quarter     Fourth Quarter     Fourth Quarter 2013-2012 Change  
INCOME SUMMARY                                              
Interest revenue   $ 61,695     $ 61,426     $ 62,088     $ 62,114     $ 64,450        
Interest expense     5,816       7,169       7,157       7,540       8,306        
    Net interest revenue     55,879       54,257       54,931       54,574       56,144     - %
Provision for credit losses     3,000       3,000       48,500       11,000       14,000        
Fee revenue     13,519       14,225       15,943       12,911       14,645     (8 )
    Total revenue     66,398       65,482       22,374       56,485       56,789        
Operating expenses     41,614       40,097       48,823       43,770       50,726     (18 )
    Income (loss) before income taxes     24,784       25,385       (26,449 )     12,715       6,063     309  
Income tax expense (benefit)     8,873       9,885       (256,413 )     950       802        
    Net income     15,911       15,500       229,964       11,765       5,261     202  
Preferred dividends and discount accretion     2,912       3,059       3,055       3,052       3,045        
Net income available to common shareholders   $ 12,999     $ 12,441     $ 226,909     $ 8,713     $ 2,216     487  
                                               
PERFORMANCE MEASURES                                              
  Per common share:                                              
    Diluted income   $ .22     $ .21     $ 3.90     $ .15     $ .04     450  
    Book value     11.30       10.99       10.90       6.85       6.67     69  
    Tangible book value (2)     11.26       10.95       10.82       6.76       6.57     71  
                                                 
  Key performance ratios:                                              
    Return on common equity (1)(3)     7.52 %     7.38 %     197.22 %     8.51 %     2.15 %      
    Return on assets (3)     .86       .86       13.34       .70       .31        
    Net interest margin (3)     3.26       3.26       3.33       3.37       3.45        
    Efficiency ratio     60.02       58.55       68.89       64.97       71.69        
    Equity to assets     11.62       11.80       11.57(4 )     8.60       8.63        
    Tangible equity to assets (2)     11.59       11.76       11.53(4 )     8.53       8.55        
    Tangible common equity to assets (2)     8.99       9.02       8.79(4 )     5.66       5.67        
    Tangible common equity to risk-weighted assets (2)     13.17       13.34       13.16       8.45       8.26        
                                               
ASSET QUALITY *                                              
  Non-performing loans   $ 26,819     $ 26,088     $ 27,864     $ 96,006     $ 109,894        
  Foreclosed properties     4,221       4,467       3,936       16,734       18,264        
    Total non-performing assets (NPAs)     31,040       30,555       31,800       112,740       128,158        
  Allowance for loan losses     76,762       80,372       81,845       105,753       107,137        
  Net charge-offs     4,445       4,473       72,408       12,384       14,505        
  Allowance for loan losses to loans     1.77 %     1.88 %     1.95 %     2.52 %     2.57 %      
  Net charge-offs to average loans (3)     .41       .42       6.87       1.21       1.39        
  NPAs to loans and foreclosed properties     .72       .72       .76       2.68       3.06        
  NPAs to total assets     .42       .42       .44       1.65       1.88        
                                               
AVERAGE BALANCES ($ in millions)                                              
  Loans   $ 4,315     $ 4,250     $ 4,253     $ 4,197     $ 4,191     3  
  Investment securities     2,280       2,178       2,161       2,141       2,088     9  
  Earning assets     6,823       6,615       6,608       6,547       6,482     5  
  Total assets     7,370       7,170       6,915       6,834       6,778     9  
  Deposits     6,190       5,987       5,983       5,946       5,873     5  
  Shareholders' equity     856       846       636       588       585     46  
  Common shares - basic (thousands)     59,923       59,100       58,141       58,081       57,971        
  Common shares - diluted (thousands)     59,925       59,202       58,141       58,081       57,971        
                                               
AT PERIOD END ($ in millions)                                              
  Loans *   $ 4,329     $ 4,267     $ 4,189     $ 4,194     $ 4,175     4  
  Investment securities     2,312       2,169       2,152       2,141       2,079     11  
  Total assets     7,425       7,243       7,163       6,849       6,802     9  
  Deposits     6,202       6,113       6,012       6,026       5,952     4  
  Shareholders' equity     796       852       829       592       581     37  
  Common shares outstanding (thousands)     59,432       59,412       57,831       57,767       57,741        
 
(1) Net income available to common shareholders, which is net of preferred stock dividends, divided by average realized common equity, which excludes accumulated other comprehensive income (loss). (2) Excludes effect of acquisition related intangibles and associated amortization. (3) Annualized. (4) Calculated as of period-end.
 
* Excludes loans and foreclosed properties covered by loss sharing agreements with the FDIC.
 
 
 
UNITED COMMUNITY BANKS, INC.  
Financial Highlights  
Selected Financial Information  
   
    For the Twelve        
    Months Ended        
    December 31,        
(in thousands, except per share data; taxable equivalent)   2013     2012     YTD
2013-2012 Change
 
INCOME SUMMARY                  
Interest revenue   $ 247,323     $ 267,667        
Interest expense     27,682       37,909        
    Net interest revenue     219,641       229,758     (4 )%
Provision for credit losses     65,500       62,500        
Fee revenue     56,598       56,112     1  
    Total revenue     210,739       223,370        
Operating expenses     174,304       186,774     (7 )
    Income (loss) before income taxes     36,435       36,596     -  
Income tax expense (benefit)     (236,705 )     2,740        
    Net income     273,140       33,856     707  
Preferred dividends and discount accretion     12,078       12,148        
Net income available to common shareholders   $ 261,062     $ 21,708     1,103  
                       
PERFORMANCE MEASURES                      
  Per common share:                      
    Diluted income   $ 4.44     $ .38     1,068  
    Book value     11.30       6.67     69  
    Tangible book value (2)     11.26       6.57     71  
                         
  Key performance ratios:                      
    Return on common equity (1)(3)     46.72 %     5.43 %      
    Return on assets (3)     3.86       .49        
    Net interest margin (3)     3.30       3.51        
    Efficiency ratio     63.14       65.43        
    Equity to assets     10.35       8.47        
    Tangible equity to assets (2)     10.31       8.38        
    Tangible common equity to assets (2)     7.55       5.54        
    Tangible common equity to risk-weighted assets (2)     13.17       8.26        
                       
ASSET QUALITY *                      
  Non-performing loans   $ 26,819     $ 109,894        
  Foreclosed properties     4,221       18,264        
    Total non-performing assets (NPAs)     31,040       128,158        
  Allowance for loan losses     76,762       107,137        
  Net charge-offs     93,710       69,831        
  Allowance for loan losses to loans     1.77 %     2.57 %      
  Net charge-offs to average loans (3)     2.22       1.69        
  NPAs to loans and foreclosed properties     .72       3.06        
  NPAs to total assets     .42       1.88        
                       
AVERAGE BALANCES ($ in millions)                      
  Loans   $ 4,254     $ 4,166     2  
  Investment securities     2,190       2,089     5  
  Earning assets     6,649       6,547     2  
  Total assets     7,074       6,865     3  
  Deposits     6,027       5,885     2  
  Shareholders' equity     732       582     26  
  Common shares - basic (thousands)     58,787       57,857        
  Common shares - diluted (thousands)     58,845       57,857        
                       
AT PERIOD END ($ in millions)                      
  Loans *   $ 4,329     $ 4,175     4  
  Investment securities     2,312       2,079     11  
  Total assets     7,425       6,802     9  
  Deposits     6,202       5,952     4  
  Shareholders' equity     796       581     37  
  Common shares outstanding (thousands)     59,432       57,741        
                       
(1) Net income available to common shareholders, which is net of preferred stock dividends, divided by average realized common equity, which excludes accumulated other comprehensive income (loss). (2) Excludes effect of acquisition related intangibles and associated amortization. (3) Annualized. (4) Calculated as of period-end.  
                       
* Excludes loans and foreclosed properties covered by loss sharing agreements with the FDIC.  
   
   
   
UNITED COMMUNITY BANKS, INC.  
Selected Financial Information  
For the Years Ended December 31,  
   
(in thousands, except per share data; taxable equivalent) 2013   2012   2011   2010   2009  
INCOME SUMMARY                    
Net interest revenue $ 219,641   $ 229,758   $ 238,670   $ 244,637   $ 244,834  
Operating provision for credit losses (1)   65,500     62,500     251,000     234,750     310,000  
Operating fee revenue (2)   56,598     56,112     44,907     46,963     51,357  
  Total operating revenue (1)(2)   210,739     223,370     32,577     56,850     (13,809 )
Operating expenses (3)   174,304     186,774     261,599     242,952     217,050  
Loss on sale of nonperforming assets   -     -     -     45,349     -  
  Operating income (loss) from continuing operations before taxes   36,435     36,596     (229,022 )   (231,451 )   (230,859 )
Operating income taxes   (236,705 )   2,740     (2,276 )   73,218     (91,754 )
  Net operating income (loss) from continuing operations   273,140     33,856     (226,746 )   (304,669 )   (139,105 )
Gain from acquisition, net of tax   -     -     -     -     7,062  
Noncash goodwill impairment charges   -     -     -     (210,590 )   (95,000 )
Severance cost, net of tax benefit   -     -     -     -     (1,797 )
Fraud loss provision and subsequent recovery, net of tax benefit   -     -     -     11,750     -  
Net income (loss) from discontinued operations   -     -     -     (101 )   513  
Gain from sale of subsidiary, net of income taxes and selling costs   -     -     -     1,266     -  
  Net income (loss)   273,140     33,856     (226,746 )   (502,344 )   (228,327 )
Preferred dividends and discount accretion   12,078     12,148     11,838     10,316     10,242  
  Net income (loss) available to common shareholders $ 261,062   $ 21,708   $ (238,584 ) $ (512,660 ) $ (238,569 )
                               
PERFORMANCE MEASURES                              
  Per common share:                              
    Diluted operating earnings (loss) from continuing operations (1)(2)(3) $ 4.44   $ .38   $ (5.97 ) $ (16.64 ) $ (12.37 )
    Diluted earnings (loss) from continuing operations   4.44     .38     (5.97 )   (27.15 )   (19.80 )
    Diluted earnings (loss)   4.44     .38     (5.97 )   (27.09 )   (19.76 )
    Book value   11.30     6.67     6.62     15.40     41.78  
    Tangible book value (5)   11.26     6.57     6.47     14.80     30.09  
                                 
  Key performance ratios:                              
    Return on common equity (4)   46.72     5.43     (93.57 )%   (85.08 )%   (34.40 )%
    Return on assets   3.86     .49     (3.15 )   (6.61 )   (2.76 )
    Net interest margin   3.30     3.51     3.52     3.59     3.29  
    Operating efficiency ratio from continuing operations (2)(3)   63.14     65.43     92.27     98.98     73.97  
    Equity to assets   10.35     8.47     7.75     10.77     11.12  
    Tangible equity to assets (5)   10.31     8.38     7.62     8.88     8.33  
    Tangible common equity to assets (5)   7.55     5.54     3.74     6.52     6.15  
    Tangible common equity to risk-weighted assets (5)   13.17     8.26     8.25     5.64     10.39  
                               
ASSET QUALITY *                              
  Non-performing loans $ 26,819   $ 109,894   $ 127,479   $ 179,094   $ 264,092  
  Foreclosed properties   4,221     18,264     32,859     142,208     120,770  
    Total non-performing assets (NPAs)   31,040     128,158     160,338     321,302     384,862  
  Allowance for loan losses   76,762     107,137     114,468     174,695     155,602  
  Operating net charge-offs (1)   93,710     69,831     311,227     215,657     276,669  
  Allowance for loan losses to loans   1.77     2.57 %   2.79 %   3.79 %   3.02 %
  Operating net charge-offs to average loans (1)   2.22     1.69     7.33     4.42     5.03  
  NPAs to loans and foreclosed properties   .72     3.06     3.87     6.77     7.30  
  NPAs to total assets   .42     1.88     2.30     4.42     4.81  
                               
AVERAGE BALANCES ($ in millions)                              
  Loans $ 4,254   $ 4,166   $ 4,307   $ 4,961   $ 5,548  
  Investment securities   2,190     2,089     1,999     1,453     1,656  
  Earning assets   6,649     6,547     6,785     6,822     7,465  
  Total assets   7,074     6,865     7,189     7,605     8,269  
  Deposits   6,027     5,885     6,275     6,373     6,713  
  Shareholders' equity   732     582     557     819     920  
  Common shares - Basic (thousands)   58,787     57,857     39,943     18,925     12,075  
  Common shares - Diluted (thousands)   58,845     57,857     39,943     18,925     12,075  
                               
AT YEAR END ($ in millions)                              
  Loans * $ 4,329   $ 4,175   $ 4,110   $ 4,604   $ 5,151  
  Investment securities   2,312     2,079     2,120     1,490     1,530  
  Total assets   7,425     6,802     6,983     7,276     8,000  
  Deposits   6,202     5,952     6,098     6,469     6,628  
  Shareholders' equity   796     581     575     469     962  
  Common shares outstanding (thousands)   59,432     57,741     57,561     18,937     18,809  
                               
(1) Excludes the subsequent recovery of $11.8 million in previously recognized fraud related loan losses in 2010. (2) Excludes the gain from acquisition of $11.4 million, net of income tax expense of $4.3 million in 2009. (3) Excludes goodwill impairment charges of $211 million and $95 million in 2010 and 2009, respectively, and severance costs of $2.9 million, net of income tax benefit of $1.1 million in 2009. (4) Net income (loss) available to common shareholders, which is net of preferred stock dividends, divided by average realized common equity, which excludes accumulated other comprehensive income (loss). (5) Excludes effect of acquisition related intangibles and associated amortization.  
* Excludes loans and foreclosed properties covered by loss sharing agreements with the FDIC.  
   
   
   
...
UNITED COMMUNITY BANKS, INC.  
Non-GAAP Performance Measures Reconciliation  
Selected Financial Information  
    2013     2012  
(in thousands, except per share data; taxable equivalent)   Fourth Quarter     Third Quarter     Second Quarter     First Quarter     Fourth Quarter  
                               
Interest revenue reconciliation                              
Interest revenue - taxable equivalent   $ 61,695     $ 61,426     $ 62,088     $ 62,114     $ 64,450  
Taxable equivalent adjustment     (380 )     (370 )     (368 )     (365 )     (381 )
  Interest revenue (GAAP)   $ 61,315     $ 61,056     $ 61,720     $ 61,749     $ 64,069